Which option best supports budgeting irregular expenses?

• A. Keep all money in a checking account.
• B. Avoid any savings plan.
• C. Maintain a revolving savings fund to cover irregular expenses and income fluctuations.
• D. Spend all surplus each month.

Answer: (C)

When you’re budgeting for costs that don’t come every month, you need a cushion that grows over time so big expenses or income dips don’t derail your plan. A revolving savings fund does exactly that: you regularly set aside small amounts into a dedicated savings pool, and when an irregular expense or a temporary drop in income occurs, you can use money from that fund without touching your day-to-day budget. Then you replenish the fund as your situation allows, keeping your overall budget stable and reducing the urge to rely on debt or credit.

Keeping everything in a checking account doesn’t build that buffer, so irregular costs can hit your cash flow hard. Skipping a savings plan means there’s no designated money ready for those costs, increasing the risk of scrambling for funds later. Spending all surplus each month eliminates the very buffer you need, leaving you unprepared for infrequent but unavoidable expenses. The revolving savings fund specifically addresses the need to smooth out cash flow by earmarking and steadily growing savings for irregular costs.